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National Rail Policy Draft White Paper First draft June 2017
Table of Contents
Executive Summary ................................................................................................... 6
Chapter 1 Introduction ............................................................................................. 9
Chapter 2 Rail's Background ................................................................................. 10
2.1 Railway Origins ........................................................................................... 10
2.2 Existing Railway Operators ......................................................................... 12
2.2.1 Transnet SOC Ltd ................................................................................. 12
2.2.2 Passenger Rail Agency of South Africa ................................................ 12
2.2.3 Gautrain ................................................................................................ 13
2.2.4 Other Operators .................................................................................... 13
2.3 Policy, Legislation and Strategies ............................................................... 13
Chapter 3 Problem Statement ............................................................................... 14
3.1 Performance Challenges ............................................................................. 15
3.1.1 Outdated Technologies......................................................................... 15
3.1.2 Low Performance and Operational Inefficiency .................................... 15
3.1.3 Underutilised Infrastructure................................................................... 16
3.1.4 Capitalised Maintenance ...................................................................... 16
3.1.5 Branch Lines......................................................................................... 17
3.1.6 Track Gauge ......................................................................................... 17
3.2 Institutional Challenges ............................................................................... 19
3.2.1 Monopolistic Markets ............................................................................ 19
3.2.1.1 Freight ............................................................................................ 19
3.2.1.2 Passenger ...................................................................................... 20
3.2.2 Cross-Subsidisation .............................................................................. 20
3.2.3 Misaligned Land Use and Rail Transport .............................................. 21
3.2.4 Skills Development ............................................................................... 22
3.3 Rail's Backlog Relative to Other Modes ...................................................... 22
3.3.1 Evolution of Rail's Position ................................................................... 22
3.3.2 The Maritime, Road, Aviation and Pipeline Modes ............................... 23
3.4 Positioning Relative to Significant Global Trends ........................................ 24
3.4.1 Rail Trends ........................................................................................... 24
3.4.1.1 Continental and Intercontinental Networking .................................. 24
3.4.1.2 Climate Change Imperatives .......................................................... 24
2
3.4.1.3 The Demise of Narrow Gauge Railways ........................................ 26
3.4.1.4 Railway Renaissance and South Africa's Strategic Backlog .......... 26
3.4.2 Road Trends ......................................................................................... 27
3.4.2.1 Logistics ......................................................................................... 27
3.4.2.2 Mobility ........................................................................................... 27
Chapter 4 Policy Guidelines .................................................................................. 28
4.1 Vision .......................................................................................................... 28
4.2 Mission ........................................................................................................ 28
4.3 Goals ........................................................................................................... 28
4.4 Objectives ................................................................................................... 29
Chapter 5 Policy Principles and Interventions ....................................................... 30
5.1 Guiding Principles ....................................................................................... 31
5.2 Primary Intervention: Rail Sector Investment .............................................. 32
5.3 Secondary Intervention: Institutional Repositioning ..................................... 33
5.3.1 Freight Rail ........................................................................................... 33
5.3.2 Passenger Rail ..................................................................................... 34
Chapter 6 Policy Statements ................................................................................. 34
6.1 Infrastructure Investment ............................................................................ 35
6.1.1 Rail Infrastructure Planning .................................................................. 35
6.1.2 Climate Change Mitigation.................................................................... 36
6.1.3 Track Gauge ......................................................................................... 37
6.1.3.1 Liberate Rail's Inherent Competitiveness ....................................... 37
6.1.3.2 Affected Corridors and their Timing................................................ 38
6.1.3.3 Standard-gauge Specifications ...................................................... 41
6.1.4 Route Rationalisation and Expansion ................................................... 43
6.1.5 Branch Lines......................................................................................... 44
6.1.6 Neighbouring Countries and Africa ....................................................... 45
6.1.7 Rolling stock ......................................................................................... 46
6.1.8 Job creation .......................................................................................... 47
6.2 Enabling interventions ................................................................................. 48
6.2.1 Economic Regulation ............................................................................ 48
6.2.2 Safety Regulation ................................................................................. 50
6.2.3 Rebalancing Rail and Road .................................................................. 50
3
6.2.4 Security Management ........................................................................... 52
6.2.5 Skills Development ............................................................................... 52
6.3 Freight Rail .................................................................................................. 53
6.3.1 Market and Organisation Structure ....................................................... 53
6.3.2 Access Arrangements........................................................................... 54
6.3.3 Intermodal Logistics .............................................................................. 55
6.3.4 Funding................................................................................................. 56
6.3.5 Private Sector Participation .................................................................. 58
6.4 Passenger Rail ............................................................................................ 60
6.4.1 Urban Guided Transit ........................................................................... 60
6.4.2 Regional Rapid Transit ......................................................................... 61
6.4.3 Long-distance Services ........................................................................ 62
6.4.4 High Speed ........................................................................................... 65
6.4.5 Funding................................................................................................. 67
6.4.6 Urban Rail Devolution ........................................................................... 69
6.4.7 Interchange and Intermodal Facilities ................................................... 71
6.4.8 Rail Tourism ......................................................................................... 72
6.4.9 Universal Design .................................................................................. 73
Chapter 7 Roles and Responsibilities.................................................................... 74
7.1 Department of Transport ............................................................................. 74
7.2 Department of Public Enterprises................................................................ 74
7.3 PRASA ........................................................................................................ 75
7.4 Transnet ...................................................................................................... 75
7.5 Single Transport Economic Regulator ......................................................... 76
7.6 Railway Safety Regulator ............................................................................ 76
7.7 Provincial Governments .............................................................................. 77
7.8 Local Governments ..................................................................................... 78
Chapter 8 Implementation Priorities ...................................................................... 78
8.1 Develop a National Rail Act......................................................................... 78
8.2 Develop a National Rail Master Plan........................................................... 79
8.3 Monitor and Evaluate Policy Implementation .............................................. 80
Chapter 9 Conclusion ............................................................................................ 80
Abbreviations and Glossary ..................................................................................... 82
4Annexure A: Railway Map of South Africa ................................................................ 85
Annexure B: Gauge Change Map ............................................................................ 86
5Executive Summary
After contributing substantially to the country's formative development, it has become
increasingly evident that the rail sector is past its peak in terms of contributing to the
national freight and passenger transport tasks. It has experienced a generally
downward trend for several decades, although there have been a few highlights. It
has lost virtually all its branch line traffic, virtually all long distance passenger traffic,
slipped from par player in global heavy haul to third place in iron ore with 6% and
fifth place in coal with 5% of the respective global markets, while general freight and
commuter rail market shares are around 10%. Meanwhile, the world's railway
industry has been reinventing itself for fifty-odd years to realise the benefits of global
railway renaissance. Year 2050 looms beyond that, by which time many
governments will depend on rail to meet substantial international commitments to
reduce transport sector greenhouse gas emissions. This will require increasing rail
traffic by two, three, four times. These events have provided eight consecutive
decades of golden opportunities, but the country's railways have barely scratched
their surface.
Rail's colonial heritage of low axle load, low speed, short trains, small vehicle profile
and monolithic organisational structure set it up for troubles in later years. The sector
had to be statutorily protected against road from the 1930s until 1988. Its inherently
uncompetitive narrow gauge technology is unsustainable in a deregulated market.
Inability to renew equipment resulted in generally outdated, low performance,
operationally inefficient, underutilised assets, which are unable to keep domestic
traffic or support exports. Road was able to punch above its weight, indeed the
demise of rail has been road's single biggest success factor. Furthermore, road and
rail do not enjoy a symbiotic relationship, which precludes spontaneous development
of intermodal collaboration. The cost to the economy due to increased road
congestion, externalities and maintenance is enormous.
Institutionally, rail transport was tightly held by national government while road
transport was devolved to both lower spheres of government. Rolling out road
infrastructure was comparatively straightforward, and vehicles easy to come by.
Ultimate investment in fixed and moving transport assets is therefore strongly biased
toward road. Consequently road congestion is already a serious problem in
metropolitan areas and truck traffic on all road categories is overbearing.
Both freight and passenger rail markets are monopolistic. Furthermore, funding for
both sub-modes is inadequate. This has resulted in investment funding for freight rail
being limited to what Transnet can leverage from its balance sheet, which is not
sufficient for its present needs, let alone positioning rail to play its destined role in
climate change mitigation. Consequently it has used its monopolist's position to
restrict its service output and maximise its financial performance. It is thus not
possible to gauge the true size of the rail freight market for driving investment. In the
case of passenger rail inadequate funding has starved all but Gautrain and
commuter rail: The latter is fighting a losing battle against deteriorating trains until
6manufacture of the next generation comes on stream. Current institutional
arrangements do not support accelerating remedial responses.
The National Rail Policy intends is to place rail on a sound footing to collaborate with
and compete against the other transport modes to position it to serve as national
land transport backbone by 2050. The remedial interventions will be two-pronged,
infrastructure investment interventions to enhance rail's inherent competitiveness,
and enabling interventions to adjust institutional arrangements to ensure that rail
functions effectively in delivering its share of the national transport task.
Regarding infrastructure investment, rail's inherent competitiveness will be
maximised by implementing standard gauge technologies on the national rail
network, while retaining existing Cape gauge on the metropolitan commuter
networks where narrow gauge does not impede inherent competitiveness. The
investment will over time redress and rebalance the inordinate differences between
rail and road asset value and market shares. Regarding enabling interventions,
regulated competition will be introduced into the freight rail market, to gauge its true
size. The Single Transport Economic Regulator will oversee access arrangements
and fees, market behaviour, public sector participation, train path allocation and
more, while the Railway Safety Regulator will adopt a risk based approach to safety
management.
Funding of both freight and passenger rail will recognise that present sources are
inadequate and government will ensure that additional sources are tapped. In
principle, government will take responsibility for infrastructure funding, while train
operators will fund their own rolling stock, an arrangement that is commonly applied
to all transport modes. Beyond that, several sources have been identified, including
private sector participation in infrastructure and rolling stock, to solve to the impasse
of too much investment backlog and too little funding ability.
The foregoing interventions will stimulate railway renaissance in the country. The
technologies that have handicapped railways will be relegated to the past as
inherently competitive high speed trains, full strength heavy haul, container double
stacking or heavy intermodal, contemporary urban rail and regional rapid transit are
enabled to occupy market spaces in which rail is strongly positioned. In addition,
revitalising the rail sector is likely to be the country's largest infrastructure project
ever, with huge job creation potential. Urban rail will be devolved and ultimately
assigned to local government. This will enable it to be nurtured in a setting where it
will be valued and integrated into other local transport initiatives. Beyond railway
renaissance, which has become the new normal, the country's rail sector will be
positioned to start making a massive contribution to climate change mitigation
targets for 2050. Boasting the lowest energy consumption of all transport modes for
a given task, rail is well-positioned to substantially reduce overall energy
consumption by increasing its volumes by two, three and four times, and thereby
7shift substantial traffic from high energy consumption air and road to low energy
consumption rail.
Transnet Freight Rail will be separated into an Infrastructure Manager and a Train
Operator, initially by accounting as separate entities and later institutionally. The
Infrastructure Manager will operate the national rail network, initially as is, and
ultimately, after remedial investment, the standard gauge high performance national
rail network. It will undertake the required brownfields and greenfields works with
funding allocated by Department of Transport. After urban rail has been devolved
and assigned to local authorities, PRASA will be repositioned to deliver long-distance
and high speed services. It will deliver long distance services by the most
economically advantageous mode, by bus or by train. High speed services will run
on dedicated routes, and will contribute lower energy consumption than classic trains
and stimulate agglomeration benefits in the corridors that they serve. In addition,
contingent on feasibility studies, passenger trains in the 160–200km/h range could
see service on some sectors of the standard-gauge high-performance national rail
network.
Metropolitan areas are already vulnerable to traffic congestion over extended peak
periods, a situation that is projected to worsen over time. Additional urban guided
transit, which can be made immune to traffic congestion on its own right of way is
contemplated in the National Rail Policy. This will not be confined to heavy metro as
at present, but on lighter density routes could use one or more of the lighter urban
guided transit variants. Regional rapid transit will provide inclusivity to outlying areas.
Department of Transport will drive the overall rail revitalisation intervention, in
conjunction with Department of Public Enterprises, PRASA, Transnet, a transport
economic regulator, the Railway Safety Regulator, provincial governments and local
governments. Department of Transport will develop a National Rail Master Plan, and
thereafter monitor and evaluate policy implementation. It is projected that the entire
suite of investment and institutional interventions will be complete by 2050.
The National Rail Policy sets out to unshackle the rail sector from the constraints of
its heritage and let it develop on the strength of challenges that it can address better
than other transport modes. While there are some that believe that the cost of
repositioning rail would be too high for the economy to bear, the cost of doing
nothing would be the cost of South Africa becoming a country with road based
transport except for metropolitan areas. By 2050, when the rest of the world is
enjoying the benefits of transport running on renewable energy, the country could
find itself dependent on expensive and polluting fossil fuelled road transport.
8Chapter 1 Introduction
Rail launched the country's economic development by rapidly networking significant
places by the fastest, most reliable freight and passenger transport mode.
Thereafter, it opened rural areas to agriculture and mining. However, the forbidding
mountainous Indian Ocean coastal belt prevented the Cape–Natal Railway from
achieving its objective. Instead, the principal network followed an inland sweep from
Cape Town via Johannesburg to eThekwini, supporting major diverging routes from
hinterlands to ports and branchlines off all of them. Notwithstanding an absence of
explicit rail policy, this foundation endured to the present. Successive governments
administered railway operations, maintenance, capacity and network expansion, as
best they could within the means at their disposal.
As other transport modes emerged over time, their competing demands and other
public interests eroded rail's influence on funding and its share of the national
transport task. Originally regulated to protect rail, deregulation of road transport in
1988 left rail in dire straits. Ultimately, in 1990 the various state-owned transport
modes were separated as commercialised divisions of Transnet Limited, while
commuter rail assets fell to South African Rail Commuter Corporation. Meanwhile,
vigorous development of rail's inherent strengths stimulated a global railway
renaissance to which many countries were attuned. As its last manifestation
emerged in the 1990s and renaissance rail became the new normal, the 1992 United
Nations Framework Convention on Climate Change imparted further impetus to rail
as countries turned to its inherently low energy consumption to help meet their 2050
greenhouse gas emission reduction targets. However, over the last quarter-century,
and with a few exceptions, it has become abundantly evident that at operational level
the country's rail sector has failed to deliver its expected share of the national
transport task, and that at strategic level it has missed the railway renaissance and is
ill-positioned to support the county's future climate change response.
In recent years several government policy documents, e.g. the New Growth Path for
South Africa of 2011, the National Climate Change Response White Paper of 2011,
the National Development Plan of 2012 and the Integrated Urban Development
Framework of 2016, have articulated many desirable but generally unrealised railway
attributes and expected contributions to the economy and society. The National Rail
Policy now sets out Government's remedial interventions to achieve rail renaissance
in South Africa, to position rail to contribute substantially to reducing the country's
harmful emissions, and to enable rail to serve as backbone of the national logistics
and mobility tasks.
9Chapter 2 examines how rail originated and relates to its setting, then lists the
country's pertinent statutes and lastly surveys the country's railway actors.
Chapter 3 examines key performance and institutional problems and compares them
to other transport modes in the country, and to global railway positioning trends.
Chapter 4 posits a Vision and Mission, as well as setting out supporting Goals and
Objectives, to guide overall policy formulation.
Chapter 5 introduces an array of high-level policy principles, which it applies to rail
sector investment and reform as fundamental revitalisation interventions.
Chapter 6 states policy interventions under the headings Infrastructure Investment,
Enabling Interventions as well as Freight Rail and Passenger Rail.
Chapter 7 sets out roles and responsibilities of the spheres of government and the
entities that deliver freight and passenger rail services.
Chapter 8 sets out policy implementation priorities; co-ordination mechanisms;
National Rail Act development; the Rail Revitalisation Programme; National Rail
Master Plan development; and implementation, governance and monitoring.
Chapter 9 concludes the National Rail Policy.
Chapter 2 Rail's Background
Much of rail's present situation can be understood in the context of its roots in policy,
society and technology. This chapter examines how rail originated and developed in
relation to its setting, then surveys the country's current railway operators and finally
lists pertinent policies and legislation from the time of progressive interventions.
2.1 Railway Origins
Man used the wheel for millennia until the industrial revolution finally replaced
muscle power by machines, initially on railways that rapidly became a formidable
freight-and-passenger wheeled transport mode. The revolution also nurtured other
transport modes so, as industrialisation advanced, machines came to power ships,
road vehicles and aircraft. In creating land transport networks, rail and road
leveraged their unique strengths to differentiate one from the other, while offsetting
their respective weaknesses as best they could. Thus they came to compete in some
situations, and complement one another in others, as they still do today.
Initially promoted by private enterprise, rail's commercial success and economic
power eventually attracted government attention in many countries, by way of
nationalisation and regulation. Rail infrastructure and operations are linked closely,
10so rail leaned naturally toward vertical integration, also of funding. Hence national-
isation, vertical integration and political correctness characterised the classic
monolithic state railway archetype. Accounting for different rail service types in one
entity seemed rational, but opportunities for undue political influence and internal
cross-subsidisation ultimately distorted the outcome, as it still does today. By
contrast, operator diversity characterises the maritime, road and aviation modes, so
their infrastructure and operations lean naturally toward vertical separation, also of
funding. Hence vessel, road vehicle and aircraft operators take publicly-funded open
access infrastructure for granted, but naturally fund their own movable assets.
The foregoing developments occurred during Europe's colonial era. By the time
colonial powers came to build railways in colonies, they had already settled on
standard gauge (and broad gauge in Portugal and Spain) for their home railways.
Reflecting the asymmetrical relationship between colonies and colonial powers, the
latter built colonial railways in South America, South- and Southeast Asia, and Sub-
Saharan Africa to narrow track gauge and substantially lower alignment, axle load,
and gradient standards than at home, and imported custom-built small-profile low-
capacity rolling stock to run on them. The territories that now constitute South Africa
joined that milieu in 1860 when private enterprise introduced the first train in Durban,
later followed by nationalisation and construction of two colonial and two republican
railway networks. Used for agricultural, military and mining traffic, they were unified
in 1910 as South African Railways & Harbours (SAR & H), a monolithic public entity
that provided freight, long-distance passenger and suburban rail services, as well as
harbour services.
Long-distance passenger trains were a significant constituent of the country's early
railways. Daily trains were the norm, several on main routes but only one on branch
lines. As the road network developed, SAR&H also deployed Road Motor Transport
intermodal services from strategically located stations. In time, direct road journeys,
and later air transport, offered superior service at lower price. Narrow gauge
constraints prevented rail from hitting back, and ultimately its long-distance
passenger market waned. The country's present urban networks also date from rail's
early years, and to some extent shaped their host cities. However, rail failed to
closely follow the country's economic and social development, hence buses, cars
and taxis eroded much of what remained of its passenger market.
The remainder of this document recounts significant events that built on the
foregoing foundation to the present day, and then introduces a national rail policy
that addresses the dysfunctions that have emerged and accumulated over time.
11The country’s current rail network is eleventh largest in the world at 22 387 route-km
or 30 400 track-km. It comprises 12 801km of national network, 7 278km of branch
lines and 2 228km of narrow gauge urban network, as well as 80km of standard
gauge regional rapid transit network. Annexure A shows the national network
together with larger-scale Cape Town, eThekwini and Gauteng urban rail networks.
2.2 Existing Railway Operators
2.2.1 Transnet SOC Ltd
Transnet State Owned Company Ltd is a major public entity under Schedule 2 of the
Public Finance Management Act (PFMA). The Minister of Public Enterprises
represents the shareholder. It owns, operates and maintains some of the country’s
principal transport assets through its Freight Rail, Engineering, National Ports
Authority, Port Terminals, and Pipelines divisions. In 1990 it legally succeeded the
former South African Transport Services (SATS), a commercialised state enterprise
that among other continued the monolithic commuter, freight and long-distance
passenger rail services that it inherited from the original SAR & H in 1981. Transnet's
establishment might have appeared to unbundle that monolithic entity, but Transnet
SOC Ltd is still a single accounting entity. Only commuter operations and long-
distance passenger services were transferred to Passenger Rail Agency of South
Africa (PRASA) in 2008.
Transnet Freight Rail (TFR) operates the national long-distance rail network and, in
addition to its own capacity requirements, also provides access to PRASA's long-
distance trains. The largest of the divisions, TFR currently contributes 51% of
Transnet's income. Transnet has implemented strategic interventions to align itself
with government priorities and shareholder compact targets in recent years.
2.2.2 Passenger Rail Agency of South Africa
Passenger Rail Agency of South Africa (PRASA), a PFMA Schedule 3B National
Government Business Enterprise, reports to Department of Transport (DoT) via a
Board. The Legal Succession Act of 1989 established its predecessor, South African
Rail Commuter Corporation as owner of all commuter rail fixed and rolling assets in
1990: It was renamed PRASA in 2008, to which Spoornet's Shosholoza Meyl long-
distance trains and Transnet's Autopax bus services were subsequently transferred.
It is funded by the fiscus (53%), fare revenue (40%) and rental income (7%).
PRASA's Rail division delivers Metrorail urban commuter services plus Shosholoza
Meyl and Premier Classe long-distance passenger services, while Its Autopax
Passenger Services (SOC) Ltd subsidiary operates fully commercial bus services. It
plays a major role in fulfilling government’s obligation to develop social and
12economic infrastructure. Per the National Land Transport Act (NLTA) it provides rail
commuter services in public interest at DoT's request and long-haul passenger rail
and bus services in consultation with DoT. It operates heavy rail commuter networks
in metropolitan areas, which offer valuable high capacity rapid transit access to inner
cities. Its City to City long-distance buses connect the country's cities and rural
municipalities, while its Translux luxury services connect its major cities and towns.
2.2.3 Gautrain
In terms of the Gauteng Transport Infrastructure Act of 2001, concessioning authority
Gauteng Province and concessionaire Bombela Concession Company agreed in
2006 that the latter would design, partly fund, construct, operate and maintain a rapid
rail link under a 19½-year concession. The Gautrain Management Agency (GMA)
Act of 2006 established the GMA, a PFMA Schedule 3C entity, to manage the
concession. Gautrain introduced novel railway concepts to the country, e.g. private
sector participation; performance to contract with penalties for missing targets;
passenger and asset security; railway safety-by-design; and regional rapid transit.
Since operations commenced in 2010, its contribution to provincial gross domestic
product (GDP) has come close to matching its initial investment, while sustaining
jobs and increasing tax revenues. It established a role model for South African
authorities that have no prior experience of implementing a greenfields rail project.
2.2.4 Other Operators
Some 250 small operators have emerged over time. Freight examples range from
railways integrated into industrial and mining production, to private sidings. The latter
industries commit to substantial inbound and or outbound rail logistics. The niche
includes locomotive and wagon leasing, infrastructure and rolling stock maintenance,
as well as outsourced operations. Passenger examples range from world class
hotels-on-wheels, to day trippers using steam locomotives and heritage coaches.
2.3 Policy, Legislation and Strategies
Disparate statutes have influenced the country's rail sector without constituting a
coherent rail policy. They, however, have informed the policy positions adopted in
this policy. Pertinent aspects are referenced where appropriate throughout this
document.
a) Constitution of the Republic of South Africa, 1996;
b) White Paper on National Transport Policy, 1996;
c) Southern African Development Community Protocol on Transport, 1996;
d) National Railway Safety Regulator Act, 2002;
e) Public Transport Strategy, 2007;
13f) Legal Succession Amendment Act, 2008;
g) National Land Transport Act, 2009;
h) New Growth Path for South Africa, 2011;
i) National Climate Change Response White Paper, 2011;
j) National Development Plan, 2012;
k) Infrastructure Development Act, 2014;
l) National Land Transport Strategic Framework, 2015; and
m) Integrated Urban Development Framework 2016.
Chapter 3 Problem Statement
While rail is a well-established industry in the country, it has experienced challenges
over time and several historic events have impacted adversely on the industry’s
overall development and the socio-economic impact it should have had on the
economy. Rail is currently not performing at the level that it should. Its low market
share, of less than 20% for general freight and less than 10% for passengers,
indicates that rail is not performing at the level that it should. Even in bulk minerals,
where rail should be unbeatable, road-going side-tipper interlinks have captured
significant market share.
Historic events, such as the De Villiers report of 1986 that recommended no new rail
investment but rather sweat existing assets, and deregulation of road in 1988, have
pushed large portions of the rail industry into acute decline. Absence of equitable
road pricing and institutional bias toward road have also advantaged road transport
operators and further eroded rail’s ability to compete effectively in the market.
Although State Owned Entities have made some investments in recent years and
there has been some improvement, the rail industry still faces many major
challenges. A massive capital investment backlog and inadequate funding, obsolete
and ageing infrastructure, deteriorating rolling stock and outdated technologies,
limitations of narrow gauge, and insufficient specialised technical skills contribute to
rail's generally moribund state. Quality issues, e.g. passenger and freight safety and
security, train overcrowding and service reliability also remain a challenge in rail.
The foregoing challenges have resulted in uncompetitively positioned, ineffectively
equipped, operationally inefficient railways that have lost their ability both to
dominate local logistics and mobility markets, and to support global exports.
Old solutions have been reapplied and have not enabled rail to rise to the country’s
transport challenges. Innovative thinking is required to address these issues. The
14country needs rail infrastructure, institutions and operators to match its economic
ambitions in an increasingly competitive global economy.
3.1 Performance Challenges
3.1.1 Outdated Technologies
Contemporary rail is a safe transport mode, however, outdated technologies still in
service compromise safety. They do not design out human error, and exacerbate
human factors challenges in safety-critical train controller and train driver jobs. They
lead to unsafe responses to abnormal conditions, while maintaining them is an
unrelenting challenge that increases their frequency. In freight rail, they contribute to
unduly high derailment propensity and poor stopping ability. In urban rail, they
undermine service quality that prompts arson incidents which lead to fewer trains
available for service, unsafe overcrowding of remaining trains and ultimately further
undermine service quality.
3.1.2 Low Performance and Operational Inefficiency
While the country takes pride in the long heavy haul trains on its narrow gauge
railways, the two other key railway metrics, axle load and speed, are mediocre
compared to countries with standard (or broad) gauge railways. Consequently, the
ratios between the output measures tonne-km per route km and passenger-km per
route km, and the input measure route km, which is the key measures of operational
efficiency, are well below achievements in those countries.
Rail commuters have shown deep dissatisfaction over low operational inefficiency as
the average distance between service failures has shrunk to less than 1000km in
recent years. Such events reduce availability of both trains and train paths, depriving
prospective passengers of confidence that the train they intend boarding will actually
run; if it runs whether there will be sufficient coaches; and if they board the train,
whether it will complete the journey on schedule or fail en route.
Shosholoza Meyl's low-technology, unreliable coaches and locomotives date from a
bygone era, the handed-down locomotives being particularly prone to repeated
failures. A scheduled, i.e. non tourist, passenger service cannot survive on that
basis: Low performance has reduced the quality and quantity of services to
irrelevance—far less than a million passengers per year. In addition to the direct
negative impact on PRASA, the resulting service disruption also negatively impacts
freight tonne-km, TFR's prime operational efficiency metric.
15As counterpoint, Gautrain, in its seventh year of service and performing to tight
targets, demonstrates that contemporary railways are able to consistently achieve
high-performance operational efficiency and safety.
3.1.3 Underutilised Infrastructure
The popular notion that railway infrastructure is underutilised, particularly outside
urban areas, rests on the observed absence of activity, or even of rolling stock, on
railway lines and yards that are visible to passers by.
The light axle load, low speed, short freight trains on existing Cape gauge mainlines,
let alone branch lines, are inherently uncompetitive against road transport because
they do not exploit any of the strengths that rail's genetic technologies endow. Rather
than representing underutilised infrastructure, the evidence indicates that narrow
gauge freight railways are unable to compete against well-developed, internationally-
proven long-haul trucking technology on the country's roads.
Long-distance passenger traffic mostly defected to other modes long ago. Modest
speed on narrow gauge track thwarted journey time reduction, in turn preventing
long-distance passenger rail from differentiating itself competitively from other
transport modes. Outdated trains could not demand higher performance from
infrastructure, which therefore defaulted to freight rail standards. Significantly, tourist
trains still prosper despite low speed, because tourists want a restful experience, not
a hasty journey.
3.1.4 Capitalised Maintenance
TFR has escalated its Capitalised Maintenance/Operating Maintenance ratio from
less than 2 to more than 5 over the last three years. As benchmark, the ratio for
United States (US) railways is around 1: They maximise effectiveness of track
occupations by combining extension and or upgrading works with routine
maintenance. In return, clients expect more reliable, safer service; increased line
capacity, expanded facilities; traffic pattern flexibility and higher network speed. Such
interventions demonstrate that a railway is intimately in touch with its market.
Capitalised costs must associate with incremental benefits, e.g. increased capacity
or extended life. Noting that assets typically emerge from TFR's comparatively high
capitalised maintenance investment with the same performance attributes as before,
the presumed intent is to extend their useful life. However, without evidence of
enhanced ability to win business or to satisfy clients, it appears that TFR is extending
the life of uncompetitive assets rather than replacing them by competitive ones, and
is therefore out of touch with its market.
163.1.5 Branch Lines
Branch lines were originally built to develop rural areas. Light track was laid for low
axle loads and short trains on typically steep and curvy alignments that constrained
average speed to 30km/h or less. Together, these attributes compromised rail's
inherent competitiveness. Over time, good quality provincial and national roads, and
even freeways, have been built parallel to or near to branch lines, on more direct
routes that permit substantially higher speeds. A few branch lines were re-laid with
heavier rails, but most still fall short of the axle load ruling on the main lines to which
they connect. Unless branch lines carry the same axle load as main lines, they in
turn compromise main line operational efficiency and hence increase overall railage
costs. Unsurprisingly, branch lines that could not compete on cost, networkability
and or service, ultimately lost virtually all their traffic to road hauliers.
Three attempts have been made to revitalise branch lines by concessioning, namely
Orange River Rail Company on the Aliwal North–Barkly East line, Alfred County
Railway on the Port Shepstone–Harding line, and Kei Rail on the Amabele–Mthatha
line. They failed in 1996, 2004 and 2010 respectively, due to their revenues being
insufficient to cover variable operating costs. Most recently, in 2015 Transnet
requested proposals to concession the 85km 18.5 tonne/axle Belmont-Douglas
branch line, but received no bid. By now it should be self-evident that branch line
revitalisation initiatives should be approached circumspectly.
3.1.6 Track Gauge
This document takes three views on competition and competitiveness to position rail
in its task environment. The first concerns rail's ability to compete against other
transport modes, recognising that railways that use inappropriate and out-dated
technologies are inherently less competitive than railways that use appropriate and
contemporary technologies. This is the domain of inherent competitiveness. The
second concerns rules of engagement among competitors in a particular market.
This is the domain of transport economic regulation. The third concerns planning the
market space within which entities and or modes will compete, with reference to their
economic and social contributions. This is the domain of transport policy.
Three genetic technologies distinguish rail from all other transport modes:
Supporting, which facilitates heavy axle load; Guiding, which facilitates high speed;
and Coupling, which facilitates long trains. They impart to rail inherent competitive-
ness in Heavy Haul (heavy axle load but low speed to convey bulk commodities),
High-Speed (high speed but light axle load to convey passengers) and Heavy
Intermodal (heavy axle load and high speed to convey double-stacked containers).
Coupling also shortens average headways between vehicles to deliver higher
17throughput capacity than any other mode, thereby counteracting rail's weakness in
light axle load, low speed passenger service. Hence rail's inherent competitiveness
extends to high-density urban services, where single-deck vehicles cannot attain
heavy axle load and maximum speed is only 80km/h, as well as to regional rapid
transit where longer distances between stations allow 160-200km/h, often using
double deck vehicles to maximise passenger count and hence maximise axle load.
Rail's genetic technologies enable it to do duty as backbone of integrated, energy
efficient urban, regional, national, continental and intercontinental transportation.
Coupling scales capacity to match demand extremes, rail being the only mode to
count freight vehicle combinations in hundreds, or to count passengers per hour per
direction in many tens of thousands.
Regarding Supporting, assertive standard (and broad) gauge railways in China,
India, North America, and Russia, that move half the world’s rail freight, operate or
aim at 30-32½ tonnes/axle for general freight and 30-40 tonnes/axle for heavy haul
and heavy intermodal. The country’s narrow gauge track generally allows 16-18½
tonnes/axle on branch lines, 20 tonnes/axle on the Cape gauge national network and
26-30 tonnes/axle on heavy haul lines. High-value low-density freight in containers,
and passengers, are light: Unfortunately, the Cape gauge centre of gravity height
limit precludes double decking passengers or double stacking containers to achieve
sufficiently high axle load to maximise rail's inherent competitiveness.
Regarding Guiding, low speed is expressed in tens of km/h, high speed in hundreds
of km/h. Thus general freight, heavy haul, long-distance passenger and urban trains
at 60-90km/h maximum are low speed. Double stack trains at 120km/h, so-called
higher speed trains at 160-200km/h, as well as high speed trains at 300km/h or
more, are high speed. Narrow gauge track does not support service-proven speeds
higher than 130km/h, hence it is unable to support high- and higher speed trains.
Narrow or Cape gauge track therefore excludes the country from the high speed and
double stacking railway renaissance market spaces, and thwarts achievement of full-
strength heavy-haul. Its narrow gauge railway foundation is incapable of supporting
three out of four railway renaissance sub-modes, thereby putting South Africa at a
competitive disadvantage to countries whose railways use standard gauge. No
surprise that its railways are generally, with exceptions, in dire straits.
183.2 Institutional Challenges
3.2.1 Monopolistic Markets
3.2.1.1 Freight
TFR owns and operates the country's only long-distance rail network, and also owns
and operates virtually all freight locomotives and wagons. By virtue of it being the
only rail freight operator, with limited local exceptions, the de facto market structure
is monopolistic. No legal constraint excludes others from the freight rail market, but
entry barriers are high and industry's participatory overtures before the last
commodities boom were declined by Transnet.
Because of this monopolistic freight rail market structure, Transnet has no
commercial incentive to develop planning methodologies showing evidence of
understanding the market within a competitive multi-operator environment, which
would have enabled it to articulate the drivers and predict the dynamics of the
relative rail and road competitivenesses that determine modal split. Transnet's Long
Term Planning Framework (LTPF), predicting only marginal change for the next 30-
40 years, projects rolling national freight demand per section as per the road-to-rail
migration strategy and market share targets without any mention or explanation
whatsoever of such strategy or targets. It consequently fails to articulate what
interventions it must implement to achieve road-to-rail shift, or how it plans to defend
itself against the rising tide of truck competitiveness. Furthermore, the LTPF fails to
recognise the major contribution that rail must make to mitigating climate change by
2050. It is understandable that Transnet, given its de facto monopoly status and
against the background of its main objective, taking into account its developmental
role, of maximising profit and shareholder value, ostensibly sees no need for or
appreciates the value of extensive or realistic modelling or planning for the whole of
freight rail as a transport mode.
TFR's compound annual growth rates over the last decade were:
Tonnes transported 3.35%
Revenue 10.7%
EBITDA 17.9%
Capital Investment 18.9%
Tonnes transported bore some relation to economic growth, but Revenue and
EBITDA grew much faster, although not as fast as Capital Investment. TFR therefore
appears more proficient at growing performance metrics than at growing output.
19TFR therefore appears to be comfortable in its monopolistic market position,
reluctant or unable to pursue opportunities significantly beyond its present volumes.
It exhibits the classic monopolistic outcome of restricting service quality and or
quantity to maximise returns within the constraints of its own financial structure. It is
therefore an inescapable conclusion that TFR is neither intimately in touch with its
present market nor effectively pursuing the rail addressable market. Such outcomes
are endemic in monopolies: They belie the notion that competition from other modes
can eliminate monopolistic behaviour, which only direct competition can do. From a
national rail policy perspective this implies that additional third party train operators
must be admitted to fully exploit rail's potential share of the freight market.
3.2.1.2 Passenger
Similarly, PRASA owns and operates the country's only urban rail networks and
provides its only long-distance passenger services, a few tourist trains excluded. The
market structure is monopolistic, and instances of apparently monopolistic behaviour
are not unknown, such as provision of insufficient capacity to meet demand and
service quality below expectations. In recognising these problems, one root cause,
namely inadequate funding over many years, must be concurrently recognised.
Setting aside long-distance passenger services addressed elsewhere, and assuming
sufficient funding, the urban rail issue reduces to maximising the value of services
procured by that funding. Several alternatives have been tried around the world, from
the traditional owner-operator solution to a privately-funded thirty-year concession
over Seoul Metro Line 9. The traditional solution numerically far outweighs others,
and is usually satisfactory when a local authority operates urban rail together with its
other urban transport solutions. Citizens whose mobility needs are closely met
develop love and respect for their urban rail systems, and treat them accordingly.
3.2.2 Cross-Subsidisation
Cross-subsidisation between operating divisions is common practice in monolithic
entities, a heritage that may ultimately cause resistance to their unbundling. It is
generally agreed that port charges currently levied by Transnet National Ports
Authority (TNPA) are excessive. Cautionary notes to Transnet annual reports since
2008, which have stated that corporatisation of TNPA in terms of the National Ports
Act of 2005 will have significant adverse financial and strategic impact on Transnet in
respect of funding and investment, have strengthened long-held misgivings that
some portion of the excess finds its way to TFR. To the extent that excessive port
charges have propped up a railway that loses domestic traffic to road hauliers and
export traffic to other countries despite that support:
20a) Three transport modes—maritime, rail and road—have been structurally
distorted, that is;
b) Excessive South African port charges have shifted exports from and
imports to landlocked countries to ports in neighbouring countries with
concomitant loss of jobs and revenue for the country;
c) Freight rail's inherent uncompetitiveness is actually worse than it
appears, but has been obscured rather than recognised and remedied,
leading to the erroneous belief that normal management interventions
can turn it around when in fact it is irredeemable by such means; and
d) Road hauliers have found themselves able to punch above their weight
due to a dysfunctional railway shedding its natural traffic to them and
thereby giving rise to undue road maintenance costs.
The overall losers are the country and its people, who suffer the bad fruits of high
costs and poor service. National Rail Policy must therefore recognise freight rail's
weak inherent competitiveness in relation to the accounting transparency and
financial sustainability that prospective private sector investors will seek.
PRASA faces comparable problems. Its government operating subsidy is inadequate
and mainly funds salaries. In addition, Shosholoza Meyl was transferred to it from
Transnet as an unfunded stepchild. While there is an evident cross-subsidy from
Metrorail to Shosholoza Meyl, if the overall quantum of funding is inadequate,
revenue and expenditure must ultimately be balanced by a blend of poor service,
deferred maintenance and capitalised maintenance, not one of which puts
stakeholders at ease.
3.2.3 Misaligned Land Use and Rail Transport
Many of the country's human settlements have far lower population density than in
other countries that use urban rail intensely. Hence it is necessary to actively align
human settlements and transport modes, to maximise the role of rail and hence to
shift traffic from road to rail. Urban planners should ideally aspire to 40 units/ha in
metropolitan residential areas. The higher the population density, the more viable is
urban guided transit (UGT). Cities with comprehensive rail-based public transport
prefer high rise buildings to squeezing in more people at ground level.
At the other end of a commute, high density trip attraction zones, e.g. central
business districts (CBDs), ideally terminate transportation corridors. Suburban office
and retail nodes are less attractive, even if they are integral to modern planning.
Direct pedestrian access to railway stations is usually only practicable in highly
developed areas such as CBDs and high-rise apartment clusters. In larger, lower
21density catchment areas, feeder and distribution services may be required. In such
cases a station becomes an intermodal facility, to be designed for that purpose.
Recognise that situations also exist in which rail is not the optimum solution,
notwithstanding that there may be heritage infrastructure on a proposed route. In
such cases it may be appropriate to defer to a more appropriate mode, such as road,
or to a more appropriate sphere of government, such as a province.
3.2.4 Skills Development
The rail industry constitutes a specialised work setting that requires specific and
sometimes scarce skills to support research, development, design; investment,
construction and manufacturing; marketing; operations and maintenance; and
corporate strategy. The impact of the industry's decline over several decades
resulted in it losing its ability to develop and retain skills. One of the challenges to its
revitalisation is therefore to restore that ability.
3.3 Rail's Backlog Relative to Other Modes
3.3.1 Evolution of Rail's Position
Railways played a founding role in the country, as private undertakings from 1860 to
1870, after which successive governments developed infrastructure and services. A
few new developments still stir pride: Gautrain introduced contemporary regional
rapid transit, PRASA initiated the world's largest commuter train procurement
programme and TFR's Integrated Solutions technology will position its services
amongst leading freight railways. In contrast to such developments, main rail routes
were completed before 1900 and most branch lines by 1910. Difficult terrain resulted
in original route alignments having tight curves and or steep gradients. Some ten
percent of mainline route-kilometers were regraded and or straightened between the
1950s and 1980s. The remaining ninety percent are still as curvy and steep as when
they were built. Even the heavy haul lines are now older than forty years, although
Ermelo-Richards Bay was doubled and partly regraded in the 1980s.
Rail's colonial heritage added more handicaps. First, penny-pinching Cape gauge
track stunted rail's inherent competitiveness so much that it cannot keep up with
economic growth, while natural rail traffic defaults to other modes. Second, the
original narrow gauge vehicle profile provided full but narrow width down to near rail
level, but constrained capacity. In time, the top portion was widened above platform
height to produce the country's peculiar mushroom-shaped vehicle profile, which
does not allow double decking or double stacking.
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